Chinese IPOs suspended to stop stock market slide

The official Xinhua news agency reported late on Saturday that 28 Chinese companies that were planning to issue initial public offerings of their stocks in the near future would now be delaying their IPOs due to the recent rapid fall in share prices.

The companies had been planning to launch their IPOs on the key Shanghai and Shenzhen stock markets, which have lost 30 percent of their value over the past three weeks, after reaching their peaks in mid-June. According to Xinhua, investors who had already subscribed to the IPOs would have their money refunded.

A report in the "Wall Street Journal" cited analysts who said the planned IPOs had been expected to attract as much as 4 trillion yuan (580 billion euros, $645 billion).

The US business newspaper reported that the decision came following a meeting of senior officials from China's State Council, its central bank, the securities regulatory agency and other financial authorities on Saturday. It wasn't immediately clear for how long the suspension of IPOs would be in effect, but previous bans have ranged from three months to more than a year.

Stabilization fund

The "Wall Street Journal" cited "people with knowledge of the matter," who said that the senior officials had also discussed the setup of a market stabilization fund.

Later, the Securities Association of China released a statement, in which it announced that 21 Chinese brokerages had pledged to invest the equivalent of 15 percent of their net assets as of the end of June "or no less than 120 billion yuan" in the fund.

According to the sources citied in the "Wall Street Journal" report, though, this would not be enough, meaning that the People's Bank of China would probably also provide financing to the stabilization fund, either directly or through the country's sovereign wealth fund.

The latest moves come after a series of initiatives, including a cut in interest rates failed to halt the stock-market slide. The three-week plunge has wiped out around $2.4 trillion in market value, a figure comparable to 10 times the gross domestic product of ailing Greece in 2014.

pfd/ng (Reuters, dpa)